Barrett: Good business models vary widely

Peer-to-peer (P2P) sharing would never have gathered momentum if the music industry had adopted models for distribution over the Internet, said Intel Chief Executive Officer Craig Barrett, addressing IT executives in India Friday.

"The music industry absolutely stonewalled the distribution method associated with the Internet to the point that peer-to-peer sharing became so prevalent, that it didn't make much difference," Barrett said.

"Five to eight years too late we are starting to see distribution models set up for distributing music over the Internet, where actually somebody gets paid for it," he said. "People are inherently honest and want to pay for goods and services and that would have happened if the music industry had adopted the technology and come up with commercial distribution models a lot earlier."

The film industry faces a similar challenge as bandwidth increases enable downloading movies over the Internet. "It would be interesting to watch whether the movie industry will in fact rapidly and aggressively adopt a distribution model consistent with the new technology," he said.

Slated to talk on corporate governance at the event hosted by the Delhi-based National Association of Software and Service Companies (NASSCOM), Barrett also spoke at length on the variety of business models companies can adopt to be successful.

A number of companies have benefited by changing the rules, said Barrett, citing retailer Wal-Mart Stores and Dell, which sells configured-to-order computers direct to customers. Wal-Mart uses IT to control inventory and point-of-sale information, to know exactly what is selling at any of its locations, how to price a product, how to price it by region, and how to replenish inventory automatically.

"Wal-Mart is really an IT company in disguise," Barrett said. "They just happen to sell products to the consumer."

Intel changed the rules to its advantage using four key strategies, according to Barrett. These included its "Intel Inside" branding program, shifting the definition of computer architecture from computer makers to companies like Intel, creating a new distribution channel of about 180,000 system integrators that build computers with Intel technology, and setting up a venture capital business that invested in companies with technologies supporting or compatible with Intel's own technologies.

"There are very few ingredient brands that have been successful," said Barrett, referring to the company's "Intel Inside" branding.

As computer devices got more sophisticated, packed with more functionality, Intel had a greater impact on the definition of computer architecture so that computer manufacturers did less research and development (R&D) in computer architecture, Barrett said. "We decided to use that to our advantage, and we decided we would foot the bill to do the R&D, we would create new architectures, and then we would give our customers that research and development information free of charge so they would use our latest products for their next generation of computer architectures," Barrett added.

Along the way, there were a number of startups with new technologies that could have posed a challenge to Intel. Barrett gave the example of Transmeta, which designed a microprocessor with a software-based approach to processing instructions that could compete with Intel in the low-power, mobile market.

"They were not particularly successful, for one, because they did not execute particularly well, and also Intel recognized what was happening, and responded quickly enough," Barrett said.

Touching on new rules of corporate governance and accountability in the U.S., including the Sarbanes-Oxley Act, Barrett said that he believes most companies are professional and honest and new regulations led companies to focus their resources on compliance, rather than on creativity and innovation.

"The U.S. political system instituted a number of rules and regulations, and perhaps the best way to describe these is that they try to legislate integrity, morality, professionalism, and behavior in a legal fashion in the corporate business world," Barrett said. "I think that the great majority of U.S. corporations were already doing all of those things, but the politicians in their wisdom have put an infinite burden of proof on everyone."

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